Thursday, July 9, 2009

Why Financial Journalism Has Struck Out

The Atlantic’s Derek Thompson wrote an interesting post today critiquing the problems of financial journalism by comparing it to political journalism:

“Politics, I think, is fundamentally different than economics because...well, I don't want to say "because it's just just simpler," even if I suspect it might be the case. Instead I'll say this: Much of economics has its own language. For many Americans, it's a foreign language. Financial regulation reforms, like assessing risk in shadow banking markets, is still, I'm unembarrassed to say, a bit shadowy to me. And the right way to do stimulus spending in a crisis is still shadowy for the economic industry, even though they've been studying it for 60 years!

On the other hand, you don't need to exotically expand your civic vocabulary to understand that American politics is about votes, interests and values, and when you stir them together, you get a stew called strategy. Everybody gets politics, because it's all so much like life. If you were tasked with describing politics exclusively through sports metaphors, I think you could do it pretty effectively. The Democrats struggling to write a passable health care bill to get conservative Democratic support? Kinda like a coach designing a playbook for a quarterback with compromised skills. Obama pledging openness rather than clenched fists to troubling foreign leaders isn't so different from a team's strategy of dealing with troubled players (Artest, Owens, Sprewell) through inclusion rather than punishment. On the other hand, after 10 months, I still can't conjure baseball metaphors for the Public-Private Investment Partnership.”

So does financial journalism simply need more metaphors? Not necessarily. But if economics is going to be as approachable as politics, we're going to have to get creative. We can start by speaking in English, as Felix Salmon wrote, rather than Wall Street acronyms. We can start by imagining our audience, not as the author of the blog post we're responding to, but as the readers of the blog post we're writing, who don't know a CDS from an STD, because we haven't fully explained it since an entry we wrote in March. But we can do it. We can be readable!

I’m actually surprised Thompson considers journalists using sports metaphors to describe politics as an example of successful coverage. I think many people would argue that coverage like that is one of the biggest problems with political journalism. It doesn’t make it more “approachable”—it just fails to adequately discuss the real issues behind legislation. We don’t get to read about the various economic advantages and drawbacks of various health care plans floated by Congress, for instance, but only about which bills can get passed. I’d hate for finance journalism to be more like that.

The mainstream media already tries to shoehorn its business and finance coverage within that structure. Reporters write profiles glorifying (or villifying) CEOs — just like they might write about politicians. They report about company X’s decision to introduce a product to battle with company Y or combat broader trend Z—just like they might write about the fight over a bill. But it’s more difficult to write an explanatory piece about a complex financial instrument—just like it’s difficult to write about the substance of various bills. Journalists need elements like conflict, plot, and characters that that don't necessarily help explain those sorts of things.

The problem is not that readers can’t understand finance (or politics) if you aren’t able to easily compare it to life, sports, or some other thing the “common man” can grasp. The problem is that journalists can’t write about it within their traditional narratives without using those sorts of metaphors. It’s not just about finding the proper language to describe collateralized debt obligations of asset-backed securities, credit default swaps and other complex financial topics in terms readers can comprehend. It’s about finding organizations and structures of stories to convey that knowledge—and I’m not sure they exist in the traditional journalist’s toolbox.

This is why blogs have been so successful in explaining the financial crisis to us. They don’t need to use the inverted pyramid structure or write killer ledes and nutgrafs — they can simply explain collaterlized debt obligations of asset-backed securities to us. Or they can use cool graphics. It’s a bit easier to get something like that on a blog than it is to get it on the front page of the New York Times.

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